but if they see $10k go into one exchange.. and $10k come out of another exchange. it can light up some flags
Does this happen in practice? Having never used centralized exchanges, I'm out of the loop on this one. If you deposited $10k (or £10k since I think you are UK based?) to Coinbase, and then next month transferred the same amount from Binance back to the same bank account, would you be flagged up as money laundering and get threatening letters from tax agencies and law enforcement? I've never heard of that happening.
thats because in fiat world. when you buy shares from broker X those shares stay in broker X's portfolio service. and when you sell its from the same portfolio/broker so when withdrawing the fiat its easy to show tracability your your bank to not flag it as new income.
however fiat going to one exchange account and then randomly another allotment enters you bank account from another exchange does flag as new income.
this is why for the last decade some banks have been freezing accounts that show linkages to exchanges and why in some countries people get contacted by the IRS
i know that users playing with their sums dont see it from the same prospective. because they can see their movements. but get out of the box and see it from the banks prospective of what they cannot see and how they would perceive it